03/21 - Macro for Humans

Market Overview

Headline

Crypto Consolidates as Dollar Weakens: A Shifting Landscape for Traders

Summary

Bitcoin is holding steady around $84,000 while the US dollar shows significant weakness. Stock markets are attempting a recovery, creating a mixed but potentially bullish environment for crypto.

Mood

Cautiously optimistic, like a hiker seeing patches of blue sky after a storm but still wary of slippery terrain.

What Changed Recently

The most notable shift is the accelerating weakness in the US dollar, which typically creates a more favorable environment for Bitcoin and other cryptocurrencies.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has shown signs of recovery, moving above its 20-day EMA. This improved risk sentiment is providing a more supportive backdrop for crypto compared to last week's uncertainty.

Dollar

The US dollar has weakened significantly over the past week, falling below key support levels. This dollar weakness often translates to strength in Bitcoin and other cryptocurrencies.

Interest Rates

The 10-year Treasury yield has fallen 6 basis points over two weeks, signaling slightly looser financial conditions that could benefit risk assets like crypto.

Bitcoin Dominance

Bitcoin dominance has remained relatively stable around 61%, suggesting a balanced market without strong rotation into or out of altcoins.

Vs 14 Days Ago

Stocks

The stock market recovery is more pronounced compared to two weeks ago, with bullish divergences suggesting potential for continued upward movement. This improving macro picture is generally supportive for crypto.

Dollar

The dollar's decline is even more evident over a two-week timeframe, representing a significant shift in the forex landscape that could drive increased interest in crypto as an alternative store of value.

Interest Rates

While yields are up 14bps week-over-week, they're down compared to two weeks ago, indicating a complex rate environment. The overall trend towards lower rates could increase appetite for crypto investments.

Bitcoin Dominance

Bitcoin dominance has cooled slightly from two weeks ago, suggesting a gradual shift towards a more balanced market between Bitcoin and altcoins.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

The market is currently in a state of equilibrium between Bitcoin and altcoins. Money isn't strongly favoring either, suggesting traders are in a 'wait and see' mode.

Hot Sectors

With the broader market in consolidation, no specific crypto sectors are standing out today. Traders are likely focusing on high-quality projects across various categories.

Volume And Activity

Trading volume for Bitcoin is below average, indicating a lack of strong conviction in either direction. This often precedes a significant move, so stay alert.

Key Shifts

Week Over Week

The most notable change is Bitcoin's 5.28% price increase over the past week, coupled with its ability to hold above the psychologically important $80,000 level.

Two Week Trend

Over the past two weeks, we've seen a shift from bearish pressure to a more neutral consolidation phase, with Bitcoin finding support and stocks attempting recovery.

Notable Reversals

The dollar's sharp decline represents a significant reversal from its previous strength, potentially setting the stage for a more crypto-friendly macro environment.

What This Means For Traders

If Youre Bullish

• Look for breakouts above the $88,000 resistance level for Bitcoin, which could signal the start of a new leg up
• Wait for increased volume to confirm any upward moves, as the current low volume suggests caution
• Consider setting stop losses just below the $80,000 support to protect against unexpected reversals

If Youre Bearish

• Watch for a potential double top formation if Bitcoin fails to break above $88,000 on its next attempt
• Look for divergences between Bitcoin's price and on-chain metrics as potential short signals
• Be prepared to quickly exit short positions if the dollar's decline accelerates, as this could fuel a strong crypto rally

If Youre Uncertain

• Focus on range-bound trading strategies between $80,000 and $88,000 until a clear breakout occurs
• Pay close attention to the S&P 500's interaction with its 50-day EMA, as a break above could signal improved risk sentiment for crypto
• Monitor Bitcoin dominance – a break above 62% could indicate a Bitcoin-led rally, while a drop below 60% might signal an altcoin season

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, caution was warranted due to market uncertainty. Now, with Bitcoin's price increase and dollar weakness, a more optimistic stance is justified, though still with careful risk management.

From 14d Ago

Two weeks ago, bearish sentiment was more prevalent. The shift to a consolidation phase with improving macro conditions now favors more neutral-to-bullish strategies.

Current Best Opportunities

Range-trading Bitcoin between $80,000 and $88,000 looks attractive, as does exploring oversold altcoins that may benefit from improving risk sentiment.

Approaches To Avoid

Avoid overleveraged long positions despite improving conditions, as the market remains susceptible to sudden shifts. Similarly, aggressive shorting seems risky given the weakening dollar.

Timing Considerations

Short-term trades (1-3 days) may work best in this consolidation phase. Be prepared to increase activity if we see a clear break above $88,000 or below $80,000 for Bitcoin.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $88,000 is the key resistance to watch. For the S&P 500, a break above the 50-day EMA (currently near $5,800) could signal broader risk-on sentiment.

Recent Breakouts

The DXY (US Dollar Index) has broken below several key support levels, suggesting potential for further decline which could benefit crypto.

Approaching Tests

Bitcoin is approaching a test of its 50-day EMA, currently just above $85,000. A break above this level could attract more bullish sentiment.

Final Advice

Main Takeaway

Stay nimble and be prepared for a potential breakout, as the consolidation phase and weakening dollar are creating conditions for a significant move in crypto.

Biggest Change

The dramatic weakening of the US dollar over the past two weeks is the most significant shift, potentially setting the stage for stronger crypto performance.

Risk Reminder

While conditions are improving, remember that crypto remains highly volatile. Always size your positions appropriately and never risk more than you can afford to lose.